A-shares decline with decreasing volume, and the reason has been found!

Ask AI · How will the uncertainty of Trump’s speech affect investor confidence in the A-shares?

On April 2nd, influenced by the uncertainty caused by Trump’s speech, the A-share market opened lower and declined throughout the day, remaining sluggish, with nearly 4,400 stocks in the red. Sectors such as computers, electronics, media, and electric power equipment led the decline.

Interviewees stated that the current Middle East geopolitical tail risks have not been eliminated, combined with the risk of sudden negative earnings reports during the April earnings disclosure period, caution is needed. The A-share market is likely to show characteristics of index oscillation, structural differentiation, and volatility convergence. In a market with differentiation, balanced allocation between technology and resource sectors is a good choice, balancing return flexibility and volatility control.

4,378 stocks closed lower

The index performed poorly, accelerating downward in the afternoon, with the ChiNext index dropping sharply. The Shanghai Composite fell 0.74% to 3,919.29 points, the ChiNext Index fell 2.31% to 3,172.65 points, and the Shenzhen Component Index dropped 1.6%. The STAR 50 declined 2.77%, while the CSI 300 and SSE 50 fell about 1%, with the Beijing Stock Exchange 50 slightly in the red.

Trading volume shrank by 167.1 billion yuan, with daily turnover dropping to 1.86 trillion yuan. The risk-averse sentiment among leveraged funds was also evident; as of April 1st, the margin financing and securities lending balance in Shanghai, Shenzhen, and Beijing was 2.61 trillion yuan.

On the market, shale gas, oil and gas service, banking, port shipping, coal, pork, and chicken concepts surged, but AI chips, semiconductors, computer software, precious metals, electronic components, and Zhipu AI plummeted.

Among 31 first-level industries in Shenwan, the petroleum and petrochemical sector rose nearly 2%, with Bohui Shares hitting the daily limit, and CNOOC Engineering, Hesong Petroleum, Compton, Lanyan Holdings, and Beiken Energy also hitting the limit; agriculture, forestry, animal husbandry, fishery, coal, banking, food and beverage, pharmaceuticals, and transportation sectors all closed in the red.

The computer sector fell over 3%, with declines also seen in electronics, media, real estate, power equipment, communications, machinery, non-ferrous metals, and defense military industries.

A total of 4,378 stocks declined, with 16 hitting the daily limit down; 1,052 stocks rose, with 32 hitting the daily limit up. Only two stocks today had daily trading volumes exceeding 10 billion yuan: Sungrow Power Supply fell 5.36% to 127.25 yuan/share, and Zhongji Xuchuang fell 3.3% to 582 yuan/share.

Market lacks sufficient absorption capacity

How to interpret the volume contraction and decline of the A-shares today? As the Qingming Festival holiday approaches, what is the market sentiment?

“Trump’s televised speech lacked substantive content to resolve supply chain crises, triggering unrest in the crude oil market,” said Hong Lei, Chairman of Jiayuan Investment, in an interview with the International Financial News. Influenced by this, the three major indices of the A-share market opened lower.

According to Paimai.com Wealth Analysis, the main reasons for today’s sharp decline with reduced volume are twofold: first, approaching the Qingming holiday, risk-averse sentiment increased, leading to insufficient market absorption and decreased trading volume; second, the market is entering a period of intensive annual report disclosures, with high-valuation tech growth sectors facing performance verification pressure, prompting early capital outflows to avoid risks.

Pan Jun, investment manager at Cheese Fund, noted that all three major A-share indices weakened collectively today, especially after President Trump’s speech, with the market accelerating downward. Trump’s speech did not send a clear signal of easing the situation as expected, but instead brought more uncertainty, implying that the conflict may continue.

In addition to external disturbances, April marks the period of dense annual and first-quarter report disclosures, shifting market focus from thematic speculation to performance verification. Previously high-flying tech growth stocks face valuation normalization pressure, with funds migrating to undervalued, high-dividend, and performance-strong defensive sectors, further intensifying the correction of growth stocks.

May continue to oscillate and bottom out

Yesterday welcomed a strong start to April, but today the market weakened again, still in oscillation. What is the short-term outlook for the A-shares?

Paimai.com Wealth believes that in the short term, the market is likely to continue oscillating and bottoming out, presenting a pattern of “support below, resistance above.” If the decline continues in the short term, it may trigger a technical rebound, but the rebound space will be limited, and the downward extent is also constrained.

“Current Middle East geopolitical tail risks have not been eliminated, combined with the risk of sudden negative earnings reports during the April earnings disclosure period, caution is needed. The A-share market is likely to show characteristics of index oscillation, structural differentiation, and volatility convergence,” Hong Lei warned. Cyclical stocks fluctuate with high oil prices, export chains are increasingly differentiated, and technology growth is driven by both policy and performance, with high-dividend/yield sectors performing steadily. The April market theme will gradually shift from valuation repair to profit-driven, and market style will transition from extreme structural trends toward balance.

“The market will generally maintain recent index oscillation and sector rotation. Geopolitical conflicts and recent US stock adjustments suppress market sentiment, with technology growth sectors experiencing relatively larger fluctuations,” said Yuan Huaming, General Manager of Huahui Chuangfu Investment. Currently, it is the earnings season, so vigilance against earnings falling short of expectations is necessary.

“Short-term, the market will continue oscillating and bottoming, with structural differentiation, unlikely to see a single trend,” Pan Jun warned. The Shanghai Composite Index is likely to fluctuate within a broad range of 3,900 to 4,050 points, with limited upside and downside potential. The core contradiction in the market is shifting from index gains and losses to the differentiation of opportunities and risks in structure,” he added. Investors should beware of unexpected escalation of Middle East tensions, the Federal Reserve’s hawkish signals leading to rising US bond yields, a stronger dollar, and large outflows of northbound funds, which could cause pulse-like shocks to growth sectors and overall market risk appetite. Additionally, the biggest risk in earnings season is the mismatch between performance and valuation, so it is crucial to avoid overhyped concept stocks with no fundamentals and sectors with declining industry prosperity and sharply lowered earnings expectations.

Balanced allocation of technology and resources

How to manage positions and sector layout before the holiday?

Yuan Huaming suggests that in a market with differentiation, balanced allocation between technology and resource sectors is a better choice, allowing for both return flexibility and volatility control. The ratio can be dynamically adjusted: when risk appetite increases, slightly raise the weight of the technology sector; otherwise, increase resource sector exposure.

Hong Lei states that high-position stocks without earnings support in thematic investments carry significant risks. The core approach is “not chasing highs, not concentrating,” focusing on high-dividend/yield sectors (coal, banks, utilities). Also, reduce short-term geopolitical trading positions, control overall holdings, diversify appropriately, and prepare for extreme scenarios, adhering to long-term investment principles.

Pan Jun believes that in the short term, the A-shares are in a phase of oscillating bottoming out, recommending controlling overall positions. Focus on two directions: one is defensive, high-dividend assets; the other is the energy security theme, including oil and gas extraction, oil service engineering, coal, and new energy sectors, which benefit from high oil prices maintained by geopolitical conflicts, combining defensive and profit potential.

Reporter Zhu Denghua

Text Editor Chen Cai